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There has been endless talk in fintech over the past year and a half about the pullback from equity investors and how difficult it is to raise money in this environment. Less is being talked about the debt investment landscape.

So, I wanted to bring Jacob Haar, Founder and Managing Partner of Community Investment Management (CIM), back on the show (he was previously a guest in 2015 and 2020). He has been a debt investor in fintech for almost a decade now and he has deep experience with fintech lending not just in the United States but increasingly around the world.

In this podcast you will learn:

• How he describes CIM today.
• How the pandemic played out for them.
• What areas of fintech he finds most interesting today.
• What countries he is focused on.
• Examples of some recent deals CIM has closed.
• The size of the typical debt facilities they provide.
• The factors CIM considers today when making an investment decision.
• Why they decided to move outside small business lending.
• How their investors view impact versus a financial return.
• How the deal between Camino Financial (podcast here) and Fundation (podcast here) came together.
• Jacob’s thoughts on transparency in small business lending and the regulatory movement there.
• Some of the key milestones that fintech lending has rea

Read a transcript of our conversation below.

Peter Renton  00:01

Welcome to the Fintech One-on-One podcast. This is Peter Renton, Chairman and Co-founder of Fintech Nexus. I’ve been doing this show since 2013, which makes this the longest running one on one interview show in all of fintech. Thank you for joining me on this journey. If you liked this podcast, you should check out our sister shows The Fintech Blueprint with Lex Sokolin and Fintech Coffee Break with Isabelle Castro, or listen to everything we produce, by subscribing to the Fintech Nexus podcast channel.

Peter Renton  00:31

Before we get started, I want to remind you about our comprehensive news service. Fintech Nexus News not only covers the biggest fintech news stories, our daily newsletter delivers the most important fintech stories into your inbox every morning, with special commentary on the top story of the day. Stay on top of fintech news by subscribing at news.fintechnexus.com/subscribe.

Peter Renton  01:09

Today on the show, I’m delighted to welcome back Jacob Haar. He is the co-founder and Managing Partner of Community Investment Management. Now I wanted to get Jacob back on the show because CIM has become one of the leading debt investors not just in this country, but globally. And while we’ve talked quite a bit about equity investing this year, we haven’t really done much on debt. So I wanted to bring Jacob on to tell us sort of the state of play in debt investment. What are the areas geographically that he’s focused on? And what are the most exciting areas of fintech today? We talk about some of his recent deals, what goes into weighing an investment decision. We also talk about the deal that came together just fairly recently between Camino Financial and Fundation. You know, we talk about The Responsible Business Lending Coalition and small business Truth in Lending. And Jacob reflects on the past 10 years in fintech lending, and gives his prognostication on the next decade. It was a fascinating discussion. Hope you enjoy the show.

Peter Renton  02:23

Welcome back to the podcast, Jacob.

Jacob Haar  02:25

Thank you for having me, Peter.

Peter Renton  02:26

My pleasure. This is the third one that we’ve done together, you’re joining a very select few. There’s only like three or four people that I’ve done three of these with. So you must be doing something right in fintech to get back three times. So anyway, let’s start by how you describe CIM today. And maybe within that description, you can talk about your investment thesis.

Jacob Haar  02:49

Well, thanks very much for having me, I guess being one of the rare few that’s been around for more than 10 years is great and terrific to continue having a conversation with you as one of the leaders in the space with Fintech Nexus, and LendIt before that.

Peter Renton  03:05

Okay, thank you.

Jacob Haar  03:06

Community Investment Management is an institutional impact investment manager that provides debt capital to fintech companies that are trying to solve pain points for folks for whom the system is broken. And we do that by providing demonstration and scale debt capital, as founders and entrepreneurs are going out there and trying to innovate to solve various different challenges that we have about how to get capital to small businesses, how to get capital to underserved communities, low income households, students for whom the system is broken. And doing that in the US, and as of the last few years doing that as well overseas in emerging markets where my background was.

Peter Renton  03:50

Okay. So then, last time we chatted, it was right in the heart of the pandemic, summer of 2020. And I know you were working on putting together some deals for small businesses. I mean, remember, small businesses obviously hit really, really hard there. Maybe you can sort of provide an update that’s now, three and a half years ago, hard to believe. But why don’t you sort of tell us sort of how the pandemic kind of played out for CIM and what what you’ve been doing since then?

Jacob Haar  04:19

The pandemic was, I think, when we spoke, right in the heart of it, we were a few months in and ramping up partnerships that we had with one of our portfolio companies, Camino Financial and another one Fundation to help small businesses who were impacted by the pandemic, survive the pandemic. And I think it was really interesting looking back on what happened over these years. You know, we went through a significant crisis during the pandemic, but much of it was in our imaginations, right. We actually didn’t see loss rates come to a level that we certainly feared in March and April of 2020. In fact, all the stimulus money and money that came into the system brought losses down to unbelievably low levels. So actually the challenge and the hard hit credit environment that we were expecting, it really never materialized. And I think we’ve gone over, to your point, 3 and a half years later, it feels like we have gone from one potential crisis to another. So it was, you know, the lockdown, the COVID 19 pandemic, how small businesses were even going to survive, and make that, the transformation that they had to make in order to stay in business.

Jacob Haar  05:35

In fact, all of these themes around digital transformation of society and commerce, that we’ve been talking about going back 10 plus years. That is how those small businesses actually survived. By being more incorporated into the digital world. And therefore that infrastructure that all these products are being built on, essentially has been accelerated, and barriers to adoption have fallen away. At the same time, you know for us, we’ve seen so many of the innovations, that we’re solving pain points for the underserved. Those now are one of the main ways that underserved customers, small businesses, etc, are able to actually get capital. And so, I think it’s fairly remarkable to see how much fintech has really grown and done well, current hard environment notwithstanding, since the pandemic. And certainly that’s been the same with CIM too. We’ve grown a lot. Our work has expanded, our team has tripled since the pandemic. And so it’s been a crazy time, but also a really exciting time to see how much all these solutions are coming to fruition and need support, need credit, need growth.

Peter Renton  06:42

I want to touch on geography because, when I first met you, which is about 10 years ago now, you were sort of just come off spending a lot of time in emerging markets, and so initially CIM was focused on the US, but you obviously had that international experience and emerging market experience. So when you’re looking globally now, at the fintech landscape, what are the areas that are most interesting to you?

Jacob Haar  07:10

I think on our first podcast, you asked for a bit of my biography. And I think I told you about how I started out in this whole business operating a microfinance institution in Azerbaijan and the Caucasus lending to refugees, right, and I look back on it, and I haven’t gone very far actually, right, because it’s still, the work is very similar. Like, ultimately, you’re looking at a part of the population for whom the system just does not work. They deserve better than what they’re getting. And they just do not have options. Partly because it’s challenging, and it’s very difficult to actually reach them to get information on them, etc. When I was in Azerbaijan, we used to send loan officers on motorcycles out to open air markets to do cash flow based underwriting of the various different small businesses. And that’s how you could lend to them successfully. Now, of course, doing that is incredibly expensive. And actually, the loss rates on those portfolios were quite low. Because it was a great relationship with the customers, it was a good understanding because of all that work, but just very expensive to reach, and continue to service those customers over time.

Jacob Haar  08:20

And so, as I think about, you know, what we’ve done to your point, when we started CIM, and started investing back in 2014, it was purely US small business focused on solving pain points via technology. And that industry has moved so much. I mean, from the early days of Funding Circle US entering the market in October, I think it was October of 2013, to Lending Club launching a small business program, you know, all of those efforts, which we were supporting and growing to the type of work today, where you actually have this infrastructure that has been built through payment processors, right through this whole change that our economy has undergone, of commerce becoming e-commerce, of payments becoming digital payments, all of that has laid a foundation to then start building various different ways to reach customers through the various different nodes that they have, and interacting with this digital infrastructure, getting all kinds of information to understand them better. Yes, you’re not sending loan officers on motorcycles out to markets, but you’re getting tons of cash flow and transaction data on those customers to really build a better understanding of them than what we had previously.

Jacob Haar  09:35

And now there’s all types of digital payments that are going to those customers, which is formalizing previously informal types of customers. And that’s happening, by the way, both in the United States as well as in emerging markets, right? And then the ability to do that all digitally, so that you don’t need to have a very expensive branch, or other type of physical brick and mortar infrastructure means that you actually can make loans to folks like that. And so, if I think about what’s really exciting, it’s all of that, it’s the way that we have lending now being embedded within commerce, within our daily lives, and how we can leverage that so that folks who previously, you know. For example in India, I was just in India for the summer, you can now pay for your three wheeler taxi ride with your phone all based on a QR code. So what does that mean? That means that a three wheeler driver is now, you have a connection to be able to reach and communicate with them, you have information on where they are, when they get paid, all that information so that you understand them better, you have a series of digital payments that settle in their account, which you can offset repayments against. And you can do it all, via, you know, one central office in Bangalore or Mumbai, etc, instead of having to have this vast, expensive network out in the community. Now, that’s not perfect for every use case. But it’s significantly changed how people have both access and affordably designed products.

Peter Renton  11:06

So then, beyond India, what are some of the other countries that you feel like there’s big opportunity? It sounds like you, you need to have some sort of digital payments infrastructure in place, so what other countries are you exploring opportunities?

Jacob Haar  11:23

Two thirds of our work is in the United States. And we remain incredibly excited about the US. Part of that just speaks to how broken things are in the United States, right? And I think this is something we’ve talked about repeatedly. You know, half of people in the US live in an emerging market, it can be hard for folks sometimes in Europe to comprehend. But you know, ultimately we have such a huge divide between folks who have less than $400 of savings, which 45% of Americans have less than $400 of savings. So they are one crisis away from bankruptcy.  So, you know, America, it certainly is a developed market, a rich market. But for many folks, it is not a market that works particularly well. And they’re not well served by the banking sector. And so, you know, I do think that there is a incredibly attractive and compelling market that needs entrepreneurs to be building the types of affordable, responsible financial services that are being built by fintech here in the US. And I don’t want to discount that by also saying, you know, we’re chasing after some shiny new object in other markets.

Jacob Haar  12:31

But when you look at markets, so India is one, Indonesia is another, where we’ve done a transaction, and we’re going to do more. We work a lot in Latin America as well. So first and foremost, Mexico, is a really compelling market, great entrepreneurs, significant venture capital, and some really terrific innovations that have happened there. We’ve done five transactions in Mexico, we also have done transactions in Colombia, in Chile, as well as Peru. So I think, you know, Latin America continues to be a really compelling case for fintech, for it to grow. And what’s very different about Latin America, about India, about Indonesia and other markets, which we’ll be entering are just the extent to which the vast majority of the population does not have access to financial services. And so it’s not, there’s a great opportunity to provide access for those who are left out, while at the same time, there’s a responsibility that we need to do this in a way that is productive, and enables those underlying customers to do better as a result of this financial services, instead of extractive where folks are able to prey on those who have not previously had access.

Peter Renton  13:43

Okay, so I wanted to talk about some of the recent deals you’ve done. I did a quick Google search and saw your in Zolve, Stori, R2, Flex, Amartha, I mean, can you just maybe give us some examples of recent deals you’ve done and how, how you structured and what they were for?

Jacob Haar  14:03

Absolutely. And the transactions do run the gamut. We have some younger companies that are have just established themselves and are coming out of stealth mode. So for example, Flex is one of those, which is a really compelling payments and charge card business that’s there to take…Previously, businesses that have not been very integrated into the the digital financial system, and bring them into that by providing various different expense management as well as other payment solutions for them. And they’re on the younger side, focused on the US. And then there are some really interesting companies like, for example, Stori which has been a partner of ours for over three years now, and is a great company, really impressive founding team focused on serving low income households in Mexico, who the vast majority of whom did not previously have access to financial services. And they’re giving them digital forms of payment via credit card and app. They’re about to launch savings. So there’s really a lot of different companies that are out there. And we have different tools for for fintechs at different stages, right.

Jacob Haar  15:15

For folks who are on the early side, we have the ability to work when they’re when they’re just coming out with relatively early business model and trying to prove and demonstrate what they’re doing. And then for other folks that have some significant equity and traction in the market, we’re there trying to help scale their work, and also prove out new products, as well. So for example, Zolve, the company you mentioned, incredible founder, who built one of the largest ride share companies in India, who looked to how broken things were for immigrants to the US market, and is providing a full suite of financial services. And they’re being sold to those immigrants in their home country prior to them actually coming to the United States. And that’s a theme that I’ve looked at through a few different investments about, you know, the folks who are creating and driving our economy here, to a large extent in the US, many of the immigrants and new Americans who are coming, and how poorly they’re served with financial services, you may be familiar with that, Peter, but they’re showing up here without, without credit history, even when you should be able financially to get credit, or banking, it’s quite difficult to do so. So these are the types of pain points where you have to look at various different parts of the market and see, alright, here’s a decent segment where things are broken, and how can we engage to solve a unique pain point for that segment?

Peter Renton  16:42

It’s a lot easier than it used to be when I, when I moved over here in 1991, I’m aging myself here, but there was no internet. And there was no way that I could get any kind of credit, even,  I remember trying to apply for a $500 Macy’s credit card and got rejected. So it’s, it’s great now that these companies are coming in and providing these services. So I just want to clarify something. So you’re providing debt capital or warehouse facility, you’re not taking equity necessarily, in these companies, you are you are providing debt, just want to clarify that.

Jacob Haar  17:16

That’s right. We don’t make equity investments in companies, we provide them with debt facilities, they’re typically in the $75 to $125 million range, for example. And we’ve done it with 40 companies over the last 10 years here at CIM. So we may end up having a warrant position in the underlying companies because of some of that provided, but that’s really just to drive alignment with the underlying companies.

Peter Renton  17:43

Gotcha, gotcha. Okay. So then, let’s sort of talk about how you how you make an investment decision, you you said, You’ve got 40 companies you’ve done, I’m sure you’ve looked at hundreds, what are the factors that you weigh most today when deciding to pull the trigger on a new investment?

Jacob Haar  18:01

So I think, you know, as an impact investment firm, we get asked this a lot around how you sync your impact approach with your financial investment approach? And for us, it really is one in the same. Meaning that the question is, why is it interesting? First and foremost, right? Like, why is the idea that you see an entrepreneur working on solving a significant pain point? And are they going about that in a way that is ultimately allowing that customer that they’re solving that pain point for, to succeed with their business, or to be in a better position in terms of their financial health. If it’s an individual, to pursue an education and come out not completely, you know, burdened by the debt that they took on to take to take that education? And so from our perspective, it’s ultimately around that key question of what is the innovation? And how is it potentially solving the pain point for for that customer?

Jacob Haar  18:01

So there’s really four areas of innovation that we look to, and I was referring to those earlier in this discussion around. Alright, well, one, how are they reaching their customers? How do they acquire their customers? How do they communicate with their customers? Right? That, for example, if it’s, uh, you know, sending direct mail, you know, we talked about fintech with fintech and marketplace lending looked like 10 years ago, much of it was, you know, the folks out of Capital One and AmEx, etc.  essentially bringing targeted direct mail. Certainly that has a place and a role. But it’s not necessarily an advantage or innovation. Compare that to, for example, going through embedded lending, where you already are working with a large group of customers, either because you have direct work with them or through a partnership in some way in which there are already customers that are there, right so that there’s a lot of innovations and how one can get access and then communicate with those customers. The second one is around how do we understand customers better, right? What sort of data are we getting? How are we potentially seeing risk in a much more refined, better way? You know, early days, there were some companies that were out there with some bold ideas about, you know, we’re going to underwrite credit based on your social network, or other things like that. There’s a lot of those hypotheses.

Jacob Haar  20:21

But often, it just comes down to, for example, open banking, and really getting a sense of what the cash flow looks like, or how their goods and services are being sold, how they’re being rated by the buyers of those goods and services, etc. But trying to build out a better understanding, which is, is so important to be able to do underwriting better, and often not being punitive because of a lack of information, because that’s what happens a lot of the time. The third one is accessing novel types of collateral. So for example, digital payments. The prevailance of digital payments. Now when we go outside, we can pay with our phone, right? It’s fairly unique. Someone like me, who’s actually a relatively slow adopter of technology, never paid with my phone, pre-pandemic. Now, I often will go out without my wallet, and I’ll end up paying with just my phone. So that forms an incredible tool to be able to get repaid and decrease loss rates. But there’s other things as well. Embedding within payroll so that, for example, folks have things deducted off of their paycheck, whether it’s goods and services, other types of collateral that either was tough to get access to, or was preventatively expensive to collect on. Embedding lending within that infrastructure enables us to drive better behavior, and ultimately decrease losses. And then the last one, which is I think, the one that actually fintech had right from day one is about decreasing cost. Right? If you look at the early version of fintech, back in the peer to peer days, the main innovation that I can think of that was there was not how folks were acquired, understood, or collateralized, it was really decreasing cost from not having as many bank branches, and having a fully digital operation. And that allowing a few 100 basis points to be saved if you’re going to consolidate debt. But that is quite important. I mean, it was as I mentioned with microfinance, making loans, especially small loans is incredibly expensive. And so decreasing costs means that one can actually be in the business of lending, and providing better access because of that lower cost point.

Peter Renton  22:35

So you started out, think it was singularly focused on small business. And now obviously, you you have also taken on several consumer centric companies. I guess, explain that kind of shift and expansion, shall we say. Why did you move just from a small business focus to a broader one?

Jacob Haar  23:01

Yeah, and so two thirds of what we do is still small business focused. But to your point in 2018, we started going outside of just pure small business. And a lot of that was around looking at many of the solutions that were coming out and how impactful they are on the lives of underserved low income households, particularly households that are immigrant households, communities of color, and others that are out there who are preyed upon by just terrible payday lenders and others. And so this system is so broken for them. And we saw great opportunities in fintech. And so a lot of what what came about is, because I came from a microfinance background, I think I always just had this small business orientation and small business, for me is one of the most interesting and challenging problems to be solved, right? It has all the unique complexity of both commercial as well as consumer. And it’s, small businesses are the backbone of our country, it’s one of the few bipartisan places of agreement.

Jacob Haar  23:01

And, you know, I think that it is in no way, taking our eye off the ball about how important it is to fund small business. But it was also a recognition, we kept getting approached by these really impactful, compelling, innovative companies that said, we’re solving this pain point for a low income population with such a better product than what they have currently. And feeling like we had the right know how approach etc, to also be able to help demonstrate and scale those solutions as well. So I think that from, you know, from our perspective, you know, we started out a relatively small player in fintech with this unique impact orientation. And I think one of the things that’s been exciting over the last 10 years, is seeing how much the founders and and backers of these companies would rather have an impact partner, providing them with the fuel to go out there and build up their portfolios, rather then have a, you know, purely a financial engineering credit approach, where folks don’t necessarily have a view on on the value that it creates for the underlying customer and for community in our society.

Peter Renton  25:14

 So your investors really want the, I imagine they want the return, do they want the impact return as well, shall we say? I mean, is that a both those things sort of equally important to your investors?

Jacob Haar  25:27

They are. Now every investor, of course, is different. We have investors who are very financial first investors, and, you know, want us to be doing things responsibly, but don’t necessarily have a frame for impact, etc. They’re just investors looking to make a responsible return. But the vast majority of our investors have both a social mission. And they expect us to execute with authenticity, to provide deep impact in terms of how we approach that, which requires also quite a bit of monitoring, measurement and feedback into how we continue to evolve and change our approach, as well as the financial return. I mean, from our perspective, we don’t have the ability to compromise on either of those. Our opportunities set are great companies from a financial position. And we should stand up the same with a non-impact player, in terms of how competitive we are. But then at the same time, we seek to deliver compelling and authentic impact, from the work that we do, to ultimately improve the lives of the end customers that we’re trying to solve pain points for.

Peter Renton  26:32

Okay, so I want to switch gears a little and talk about a recent deal that happened in, that I actually wrote about, and I actually remember we chatted about it as it was happening, the Camino Financial and Fundation – two small business lenders that have been around for quite a long time. I’ve had both CEOs on my podcast, I’ll link to them in the show notes. Tell us a little bit about that deal and your role in it.

Jacob Haar  26:57

Yeah, well, this was a really exciting development. That happened a couple of months ago, and we’ve been working on it for quite a while. And I think you’ve interviewed Sean Salas, founder of Camino in the past, and he and his colleagues have built this incredible mission driven company that is funding Latinx micro entrepreneurs, and giving them capital, I mean, talk about folks for whom this system is broken. Sean has an incredible personal story along with his twin brother Kenny, that he co-funded the company with, and took this company to reach a group that is really tough to solve pain points for, with a lot of success in terms of scale, while at the same time, I don’t know if he’s been on your podcast, but Sam Graziano and Sandip Nayak, who built Fundation into a bank partner type of lender, they have a software business there as well, for lending as a service. And both of them were doing good work in their separate perspectives. But there was a really compelling reason to bring the two companies together, combine the management teams, and have a full suite of credit products, as well as with a CDFI license because of the important impact work that they’re doing for small businesses, particularly Latinx small businesses, and others.

Jacob Haar  28:17

And so worked very closely with the folks over at LL Funds, who were one of the backers of Camino, and to basically merge the two companies. And it’s something that we’ve doubled down in terms of our, providing a credit line, a $200 million credit line from us, as well as bringing in equity and some new partners and everything in there. And then the icing on the cake in terms of why I’m so excited about it is Mickey Konson, who was the co-founder of StreetShares. A platform that I know you and I both know well. You invested in it I remember from your, from the loan pool that you put online, and very early. And we were one of the first funders of StreetShares for many years. And so Mickey, just an incredible individual who came from Capital One, had a lot of small business expertise. And between that and everything he’s done since with StreetShares, the acquisition from StreetShares. And some of the other work he’s done with 2nd Order Solutions, etc. Just couldn’t be more excited about having Mickey at the helm. So you know, Sandip, Mickey, Eddie, Kenny, the rest of the team there, just really excited to see folks come together and build what I believe could be a generational, small business lender for the time that we’re in right now where banks are pulling back. And there is a need and a real opportunity for a very strong credit oriented team to be working in the small business space.

Peter Renton  29:46

And you’ve been a big proponent of transparency in small business lending and you were one of the founders, I believe of The Responsible Business Lending Coalition. There’s now been regulatory movement in some states around kind of more transparency for small business lending. Tell us a little bit about what your, what you’ve done there. And what the state of play is?

Jacob Haar  30:11

Yeah, we’ve been an early member of The Responsible Business Lending Coalition that put out the Small Business Borrower’s Bill of Rights. And I think from our perspective, it’s relatively simple, right, is that we need ultimately to have best practice in lending to small businesses, because they are not as sophisticated as large businesses in terms of how they understand loan terms, they don’t necessarily have full time CFOs. And so, you know, one of the real limitations here in the United States is that Truth in Lending does not extend to small businesses, in most places, it stopped short. And so if you’re a consumer, there are requirements in the Schumer box and other standards, to disclose to you clear and transparent terms, so that you have a sense of what the obligation is. And you can make an apples to apples comparison, right? Small business does not benefit from that in most parts of the country, because the government sees it as two private parties putting together a private contract. And I think the challenge there becomes the sophistication of a small business owner, when they are negotiating against, for example, a small business oriented lender, they need those extra protections, and they need more transparency in the space.

Jacob Haar  31:23

So we were really excited to see some of the victories, whether it was SB 1231 here in California, some other state by state work that’s been done by the RBLC and the Coalition partners, as well as working on trying to get some movement at a national level. I think most Americans, and actually most folks in Congress agree that small businesses should be protected. And ultimately lenders to them should be required to follow responsible lending practices. But it has been challenging to make the progress that’s needed to ultimately get this type of transparency enshrined in law. So there are many folks out there, and many of our allies in the fintech world, as well as more broadly, that are working to try to advance this Responsible Lending Agenda for small business. And I do think that, you know, we’ve had more success than setbacks, and ultimately, we will get it over the line in the future.

Peter Renton  32:22

Okay, so I want to close with both a backward looking and forward looking question. So you’ve been in fintech for a decade, we talked about that. And there’s been a lot of progress, particularly in the fintech lending space in that time. So what are some of the key things that you think, the key milestones of the last 10 years, and what do you think when you look at the next 10 years, what are you most excited about?

Jacob Haar  32:51

It’s a great question, Peter, a very big question!

Peter Renton  32:54

It’s a big question. We could have a whole podcast just on that question. But let’s see if you can wrap it up in a couple of minutes.

Jacob Haar  33:01

Key milestones – yeah, I mean, it’s been, you know, I think if I look back on the last 10 years, perhaps I’m a low expectation kind of guy, being a credit person, but I did not expect as much progress towards building a more inclusive financial system, as the one that has been built by fintech over the last 10 years. I mean fintech has been, exceeded certainly, my greatest expectations about its growth and ability to reach into the lives of folks for whom the system is broken, the amount of fintechs that have been funded, that have grown, but at the same time, it’s been a really challenging period. Right? If you look at the companies in those early days, call it 2013 through 2016, the ones that went public, a lot of them have struggled. Their business models, you know, the marketplace lending business model did not advance as far as, I think many folks thought that it might, partly because in my mind of some challenges on alignment of incentives and the institutional lending market, I think that, you know, that said, the transformation of how society and commerce has become more digital, and the way that fintech is able to build responsible lending into that digital infrastructure, has been quite remarkable. And so if I think about, for example, the growth of Square, Toast, I mean, many of these types of embedded lending that has come out, which is quite different from say, the early consumer lenders in fintech, I think it’s been fairly remarkable.

Jacob Haar  34:38

I mean, the other thing, certainly to talk about in terms of milestones is just the, the crazy amount of equity that came into this market in 2021, the first half of 2022. And then the stark pullback of that money, second half of 2022 and 2023. And so, I think folks recognize how much progress and how important the fintech work has been, and how essential it will be to financial services going forward, while at the same time, the environment which we live in today as a credit person is one that I actually think is challenging, but better to build a business in. Because the entrepreneurs and folks that we see today are building their businesses with pathways to profitability based on good unit economics, understanding that you are not able to raise you know, a huge round and just expect to blow the money and raise it again. In fact, the money that is being raised is being invested in really good, productive uses to be able to put those companies in a position to be market leaders in the future. And so that’s, the environment that we’re in right now. It’s hard, but good companies are getting funded. And I see that all the time. And there are still lots of founders who are working on solving these pain points.

Jacob Haar  35:59

So on a go forward basis, I think that we’re really well positioned. I mean, I think that the over exuberance of a few years there, has been offset with the other swing of the pendulum. And we actually are in a position now to have great entrepreneurs, good companies, and a lot of investors who are focused on supporting and building the fintech companies to embed financial services into this new digital world that we’re all existing in which if it wasn’t for COVID, I’m not sure it would be this far along.

Peter Renton  36:28

Right.

Jacob Haar  36:28

So COVID has been a brutal time for everyone, I think personally and professionally, but it has accelerated this transformation of our world. And capital now is getting embedded into everything. And that is a way that we can ultimately drive more access, more inclusion. We just have to make sure that these are responsible products that we’re backing, and there are lots of responsible solutions to be backed. And so you know, I’m more excited about the next 10 years than certainly I am about the 10 years that we’re just completing.

Peter Renton  37:00

Well, that’s a good place to end it there. Jacob, always great to chat with you. Thanks so much for coming back on the show today.

Jacob Haar  37:05

Thanks so much, Peter. It’s great being here with you.

Peter Renton  37:09

Well, I hope you enjoyed the show. Thank you so much for listening. Please go ahead and give the show a review on the podcast platform of your choice and go tell your friends and colleagues about it. Anyway, on that note, I will sign off I very much appreciate you listening, and I’ll catch you next time. Bye.

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